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Random Thoughts: Trying to Stem the Crimson Tide


Tensions rise as calmer heads attempt to prevail.

"Mr. Hunter, we have rules that are not open to interpretation, personal intuition, gut feelings, hairs on the back of your neck, little devils or angels sitting on your shoulder. We're all very well aware of what our orders are and what those orders mean. They come down from our Commander in Chief. They contain no ambiguity."
- Capt. Frank Ramsey, Crimson Tide

When I was a child, my mother used to tell me, "When it's on your lung, it's on your tongue." I suppose that was her way of saying I wore my heart on my sleeve, that when I felt something, it was self-evident by the expression on my face or the words that came out of my mouth. That continues to this day and it's both a blessing and a curse.

As Old School Minyans can attest, I "put it out there" and share my fare for those who care. I bring this up now as I've experienced a particular "heaviness" of late. I'm unsure what precisely that means, but I've learned to trust my gut through the years for when I haven't, I've paid a steep price.

Capt. Ramsey was right; we have trading rules and guidelines for risk management that aren't open to interpretation, personal intuition, gut feelings, hairs on the back of our neck or little devils and angels sitting on our shoulders. Still, I would be remiss if I didn't share this sharp sense with our community. If nothing else, honest communication is at the core of who we are and what we do. It's how we roll in the 'Ville.

Perhaps this column will serve as a contrarian signal given the bovine backstop of S&P 1150 is upon us. Maybe there are other dynamics in play that I can't precisely qualify, clouding my judgment and confusing my antennae. Either way, I feel better knowing we're on the same page as we find our way through this freaky fray.

With that off my chest, I can get back to the business of the business at hand.

Some Random Thoughts, in no particular order:

  • Have we really arrived at the point where Freddie Mac (FRE) needs another $10 billion and it's barely a blip in the mainstream media?

  • "Crash" comes home from the vet this evening and will spend the night at home. If the market rallies smartly tomorrow, the "Crash Index" will secure a spot alongside the Sleep-O-Meter, Out-of-Office indicator, First Move-False Move (after the FOMC), contra-hour and Turnaround Tuesday in the Nonsensical Idioms That Actually Work Hall of Fame.

  • Expect Hoofy to cling to S&P 1150 like a baby clings to a woogie, particularly in front of tomorrow's breakfast with Beeks (unemployment report). Our midday tea leaves suggest a trend-line violation to the downside but we must always be on the lookout for Snapper, if only to keep Boo honest and on his toes.

  • I've said over the last month or so that "long vol" was the best bet on the board. With the VXO up more than 90% in twelve sessions, that compression is no longer there. That's not to say the fear index can't spike to past levels of lore -- 50, 60 or higher -- but the risk-reward of a pure positive gamma play is no longer there in the near-term.

  • Hey, did you hear the one about denial, migration and panic? You may wanna listen to it again as the dip (buying) shtick is good and thick out there.

  • We're working on some very snazzy situations for ye faithful -- both Ambassadors in the Minyanville Underground Railroad and the community of MV Proper -- so stay tuned for some game-changing dynamics from the front. Once we get this office move out of the way, as well as several other necessary items, you're gonna feel the earth, move, under your feet.

  • What, you ask, is the Minyanville Underground Railroad?

  • As you immerse yourself in the flickering ticks, I'll ask you to take a moment to remember that Mother's Day is a few short days away. Do what you can, as you can, but pay homage; without her, there would be no you.

  • FDIC Chairman Sheila Bair (no relation to William) is on record supporting the use of a modern-day financial bunker buster (banning or restraining "naked" CDS) and truth be told, my sense is that we'll arrive at a point when its no longer a choice. It will be a matter of last resort.

  • The risk, of course, is unintended consequences, such as "counter-party contagion" (which I've not yet heard used in the marketplace). With upwards of $500 trillion in derivatives tying together our fragile world, that would likely set off a new string of dominoes laced with dynamite.

  • Why fragile? Cookie, if a Financial Accounting Standards Board could single-handedly sink the entire global financial construct, how stable is that construct to begin with?

  • Speaking of "Crash," can you imagine what went through his mind when he awoke from the anesthesia with a "lampshade" on his head, yawned and looked between his legs? Something like, "WTF did I do last night?!?!"

  • Overnight sovereign spreads widened on the aggregate, with Lithuania and Hungary standing out on a relative and absolute basis.

  • So, Jean-Claude Trichet said, "For me, a default is out of the question" for Greece?

  • Whew! Glad we got that squared away. Now if I could only shake the image of Allan Schwartz on CNBC from my crowded keppe.

  • Do you think Jimmy Cayne appreciated Hoofy and Boo's holiday gift?

  • The court of public opinion and a court of law will collide today. UBS (UBS), Deutsche Bank (DB), JPMorgan Chase (JPM) and Depfa Bank (the Irish unit of Germany's Hypo real estate) face trial after having been accused of earning €100 million in "illicit profits" in the sale of derivatives linked to a bond issue by the city of Milan, according to the Wall Street Journal. Pay attention to this case, Minyans, for it may serve as a precursor for many more lawsuits to come.

  • Why do bears get grizzly when the red spreads and bulls get louder when screens are green? Aren't we supposed to buy low and sell high?

  • If you're digging the Buzz, can you tell two friends and we'll do the Faberge thing?

  • I was channeling Kaaaaaareen earlier as it pertained to the metaphorical imagery. I know there are traders, like my best friends, who would have gotten out of there the minute a cartoon gave them an outfit to wear. But I didn't, I gotta admit the truth; it turned me on.

  • Come on now, a little levity goes a long way. For that reason and that reason alone, I'll share this rarely seen, sorta spicy, but 100% verbatim accurate report from Hoofy & Boo as it pertains to financial regulation.

  • Enjoy the segment, and enjoy your journey.


Position in S&P
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